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Ghost of Igloi
RE: Down goes the Dow
Federal Reserve policy has been at an accomodative extreme for seven years, yet the GDP has averaged a measley 2% annually. Automobile sales are at record levels but with higher percentages of leases and subprime loans. Housing has recovered if you include multi-family units, but massive amounts of bad loans and mortgage bond loses remain on the books of banks and the Federal Government. Job creation in this cycle has been highlighted by bartenders, barristas, servers, and hotel workers. The Federal Reserve balance sheet has balooned from $900 billion in 2008 to $4.4 trillion today. Since March 9, 2009 the market has tripled from its 666 low.

Unbelieveably, many investors are unable to make the connection of low interest rates to market speculation. Yet it is very easy to understand, you borrow low and speculate in the most liquid market in the universe. The Fed has your back.

It is hard to fathom that one cannot see the risk or imagine that it could all end very badly. Most of the central bank policies are theories and unlike anything in financial history.

Would you lend anyone money for ten years at 2%? How about lending money for 30 years at 4%? Yet many of you think one can continue to earn 10% equity returns with little risk.

Good luck, for your belief system is already being challenged.


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